David Schawel:
Has a post that is a bit difficult to read due to many abbrevations and jargon I think I got the gist of it: He doesn’t know.
Neither do I, but there seems to be a plan in progress.
1. De-link the Spanish economy from the financial meltdown.
If there isn’t a viable Spanish economy there is no point in keeping the banks afloat.
2. Renovate the Spanish economy.
That is easier said than done: Spaniards are producing cars, houses nobody need and catering to tourist who do absolutely nothing. This can’t go on.
- There has to be another economic structure and Spain has to find a livelihood.
- There has to be a completely different tax-system. The overburdened younger generation with un-payable mortgages must have a smaller tax-burden and it has to be taken from the retired part of the population. Youth unemployment is NOT a new phenomenon in Spain.
- See what can be done with the remnants of the old industries and agriculture.
- But above all: Balance the budget.
3. Save the foreign bank system
It can’t take a wallop of similar nature to the greek. Spain is to big.
This means get the Spanish sovereign bonds back where they belong – in Spain and in the Spanish banks. There will be extended ECB loans so the Spanish banks can buy back (to some extend) the Spanish sovereign bonds. That will take the pressure off the German and French banks.
Next it means keeping the hedge funds and similar speculators from using the Spanish bond as a weapon against the Euro. Maybe some didn’t get the message from the Greek bankruptcy: Speculation against the Euro is very stupid – and worse expensive.
Make certain that the Spanish banks shareholders loose the fictional value in banks equity.
4. Recapitalise the Spanish banks.
It is totally out of the question to raise sufficient capital on the market as losses are several times equity. The Chinese seem to have withdrawn from the idea of investing in European banks – they probably found out it would only mean that some the losses above the “equity” would be paid for by the Chinese – and Chinese have no sense of humour.
That will probably be done by the Spanish State over several year.
5. Confiscating the pensions.
This can be done by the relatively simple expedient of taxing the pension funds according to the annual refinancing need.
The important matter now is to stop further bleeding through public deficits. As long as Spain adhere reasonably to the narrow path of virtue. They will be “rescued”. Any romantic revolutionary tendencies or disobedience will be punished by withdrawing credit.
When a private person lives above his means, there will come a time when the creditors control your life – same thing with a state.
How do I know that – I don’t; but if anybody think they are going to mess around with a currency Germany is involved with they are dead wrong.
